Tainted Transactions
Mini Teaser: How a team of Cambridge operators, working together with a Russian "clan", confused all categories and wreaked havoc on Russia's economy.
Only a few years ago, American policymakers were confidently
predicting that a regimen of privatization and market reform would in
due course transform Russia into a stable and prosperous democracy.
America would smooth this transition and U.S. aid--unselfish and
urgent--would serve as a "bridge", enabling representatives from both
sides to implement their respective agendas. Pictures of "Bill" and
"Boris" embracing and beaming at the camera symbolized the promise of
a new era in U.S.-Russia relations, one that bore little resemblance
to the preceding decades of Cold War acrimony.
Today all that has passed away. Far from fulfilling their promise of
a better life, the U.S.-sponsored "reforms" of the 1990s have left
many, if not most, Russians worse off. For this state of affairs many
Russians today blame precisely the Western aid and advice they have
received. Some, indeed, believe that the United States set out
deliberately to destroy their economy.
How did the United States, by far the dominant partner in the
relationship, allow one of the most promising rapprochements of the
last century to founder? Rather than proceeding on the basis of
common sense and well-established modes of representation between
states, it acted upon an ideology implemented through a most dubious
mode of conducting relations between nations. The ideology--that of
radical privatization and marketization, applied in this instance in
a cold-turkey manner to a society with no recent experience of
either--is well known. The way in which advice and aid were given is
much less familiar, but it is a vital part of the story.
It is necessary to give this distinctive way of conducting business a
name, and, drawing on my experience as an anthropologist, I shall
call it "transactorship." By "transactors", then, I shall mean
players in a small, informal group who work together for mutual gain,
while formally representing different parties. Even though
transactors may genuinely share the stated goals of the parties they
represent, they have additional goals and ways of operating of their
own. These may, advertently or inadvertently, subvert or subordinate
the aims of those for whom they ostensibly act. The behavior of
members of such groups is marked by extreme flexibility and a
readiness to exchange roles, even to the extent of representing
parties other than the ones to which they are formally attached.
In what follows, I shall show that during the 1990s the cozy manner
in which American advisers and Russian representatives--that is, the
transactors--interacted and the outcomes of their activities ran
directly counter to the stated aims of the U.S. aid program in
Russia. Specifically, those goals were to foster economic development
and democratization and to nurture friendly bilateral relations. As a
new decade begins, key transactors in this program are under
investigation for money laundering, corruption and other criminal
activities--the consequences of their undeclared goals.
Transactorship, as it applies in the U.S.-Russia relationship over
the last decade, involves individuals, institutions and groups whose
official status is difficult to establish. Indeed, nearly everything
about transactors is ambiguous. Their sphere of activity is neither
fixedly public nor private, neither firmly political nor economic;
their activities are neither fully open nor completely hidden and
conspiratorial; and the transactors are not exclusively committed to
one side or the other. This malleability affords them enormous
flexibility, which in turn enhances their influence on all sides.
Alas, it is also what has sabotaged the once high hopes for a new era
in U.S.-Russia relations.
The Emergence of Transactorship
How in the case of Russia and the United States did the transactors
come together to be designated as the bridge builders from their
respective sides? As the vast Soviet state was collapsing in late
1991, Harvard professors Jeffrey Sachs, Andrei Shleifer and others
participated in meetings at a dacha outside Moscow. There, young
would-be Russian "reformers" were in the process of devising a
blueprint for economic and political change. The key Russians present
at the dacha were the economists Yegor Gaidar and Anatoly Chubais.
These meetings occurred at the time when Boris Yeltsin, then
president of what was still Soviet Russia, was putting together his
team of economic advisers. Gaidar would become the first "architect"
of economic "reform" in post-communist Russia. A long-standing group
of associates from St. Petersburg, centered around Chubais, was to
figure prominently in Yeltsin's team. Indeed, Chubais would go on to
replace Gaidar, and to become an indispensable aide to Yeltsin.
While at the dacha, Sachs, his associate Anders Ã…slund and several
other Westerners offered their services to the Russians, including
that of facilitating access to Western money--an offer the Russians
accepted. In the ensuing months and years the members of the Harvard
and Chubais teams saw to it that they became the designated
representatives for their respective sides--and transactors in the
sense I have described. On the American side, representatives from
the Harvard Institute for International Development (HIID) would
provide the theory and advice to reinvent the Russian economy.
Maintaining that Russian economic reform was so important, and the
"window of opportunity" to effect change so narrow, U.S. policymakers
granted the Harvard Institute special treatment. Between 1992 and
1997, the Institute received $40.4 million from the U.S. Agency for
International Development (USAID) in non-competitive grants,
and--until USAID suspended its funding in May 1997--had been slated
to receive another $17.4 million. Harvard-connected officials in the
Clinton administration, citing "foreign policy" considerations,
largely bypassed the normal public bidding process required for
foreign aid contracts. The waivers to competition were backed by
friends of the Harvard Institute group, especially in the U.S.
Treasury. Approving such a large sum of money mostly as
non-competitive amendments to a much smaller award (the Harvard
Institute's original award was $2.1 million) was highly unusual,
according to U.S. government procurement officers and U.S. General
Accounting Office (GAO) officials, including Louis H. Zanardi, who
later spearheaded GAO's investigation of HIID activities in Russia
and Ukraine. Indeed, the U.S. government delegated virtually its
entire Russian economic aid portfolio--more than $350 million--for
management by the Harvard Institute. The Institute was also provided
the legal authority to manage other contractors (some of whom were
its competitors), leaving it in the unique position of recommending
U.S. aid policies while being itself a chief recipient of that aid.
In 1996 the GAO found that the Harvard Institute had "substantial
control of the U.S. assistance program." According to U.S. government
procurement officers and GAO officials, delegating so much aid to a
private entity was unprecedented.
In Russia, the Harvard representatives worked exclusively with
Anatoly Chubais and the circle around him, which came to be known as
the Chubais Clan. The interests of the Harvard Institute group and
those of the Chubais Clan soon became one and the same. Their members
became known for their loyalty to each other and for the unified
front they projected to the outside world. By mid-1993, the
Harvard-Chubais players had formed an informal and extremely
influential transactor group that was shaping the direction and
consequences of U.S. economic aid and much Western economic policy
toward Russia.
Providing pivotal support to the Harvard-Chubais transactors was
Lawrence Summers, earlier a member of the Harvard faculty and at this
time chief economist at the World Bank. Summers had strong ties to
the Harvard team, including Shleifer, the economist who served as
project director of the Harvard Institute's program in Russia. Soon,
Summers would play a principal role in designing U.S. and
international economic policies at the U.S. Treasury, where he would
occupy the posts of undersecretary, then deputy secretary and,
finally, secretary.
The Chubais transactors advertised themselves, and were advertised by
their promoters, as the "Young Reformers." The Western media promoted
their mystique and overlooked other reform-minded groups in Russia.
Western donors tended to identify Russians as reformers not on the
basis of their commitment to the free market but because they
possessed personal attributes to which the Westerners responded
favorably: proficiency in the English language; a Western look; an
ability to parrot the slogans of "markets", "reform" and "democracy";
and name recognition by well-credentialed fellow Westerners. Members
of the Chubais team possessed all of these qualities. By their
sponsors in the West, they were depicted as enlightened and uniquely
qualified to represent Russia and usher it down the road to
capitalism and prosperity. Summers dubbed them a "dream team", which,
given his position and status, was a particularly valuable
endorsement.
In Russia, however, the Chubais transactors' primary source of clout
was neither ideology nor even reform strategy, but precisely their
standing with and their ability to get resources from the West. As
the Russian sociologist Olga Kryshtanovskaya explained it,
"Chubais has what no other elite group has, which is the support of
the top political quarters in the West, above all the usa, the World
Bank and the IMF, and consequently, control over the money flow from
the West to Russia. In this way, a small group of young educated
reformers led by Anatoly Chubais transformed itself into the most
powerful elite clan of Russia in the past five years."
U.S. support proved decisive in this transformation. The
administration's "dream team" seal of approval bolstered the Clan's
standing as Russia's chief brokers with the West and the
international financial institutions, and as the legitimate
representative of Russia. It also enabled the Harvard-Chubais
transactors to exact hundreds of millions of dollars in Western loans
and American aid.
The Modus Operandi
It is time now to look in greater detail at the way in which this
extraordinarily effective operation worked--effective, that is, in
acquiring standing and funds. There were five basic operating
principles.
* Democracy by Decree
The transactors' preferred way of proceeding in the Russian context
was by means of top-down presidential decree. U.S. officials
explicitly encouraged this practice as an efficient means of
achieving market reform. As USAID's Walter Coles, a key American
official in the privatization aid program, put it, "If we needed a
decree, Chubais didn't have to go through the bureaucracy." Rule by
decree also allowed the transactors to bypass the democratically
elected Supreme Soviet and the Duma. The Harvard Institute's Russia
director, Jonathan Hay, and his associates went so far as to draft
some of the Kremlin decrees themselves. Needless to say, this did
nothing to advance Russia's evolution toward a democratic system, nor
was it consistent with the declared American aim of encouraging that
evolution.
* Flex Organizations
A similar anti-democratic ethos pervaded the network of
Harvard-Chubais transactor-run organizations. The transactors
established and oversaw a network of aid-funded, aid-created
"private" organizations whose ostensible purpose was to conduct
economic reform, but which were often used to promote the
transactors' parochial agendas. These organizations supplanted or
circumvented state institutions. They routinely performed functions
that, in modern states, are typically the province of governmental
bureaucracies. They served to allow the bypassing of the Duma and
other relevant actors, whose input was in the long term crucial to
the successful implementation of economic reforms in Russia. Further,
the aid-created organizations served as a critical resource for the
transactors, a vehicle by which to exploit financial and political
opportunities for their own ends. I call these bodies "flex
organizations" in recognition of their impressively adaptable,
chameleon-like, multipurpose character.
The donors' flagship organization was the Russian Privatization
Center, which had close ties to Harvard University. Its founding
documents state that Harvard University is both a "founder" and "Full
Member of the [Russian Privatization] Center." The center received
funds from all major and some minor Western donors and lenders: the
United States, the IMF, the World Bank, the European Bank for
Reconstruction and Development, the European Union, Germany and
Japan. The center's chief executive officer, a Russian from the
Chubais Clan, has written that while head of the center he managed
some $4 billion in Western funds. The Chamber of Accounts, Russia's
rough equivalent of the U.S. General Accounting Office, investigated
how that money was spent. An auditor from the Chamber concluded that
the "money was not spent as designated. Donors paid . . . for
something you can't determine." When I interviewed aid-paid
consultants working at the center, I was told that the funds were
routinely used for political purposes.
The center was an archetypal flex organization, one that switched its
identity and status situationally. Formally and legally, it was
nonprofit and non-governmental. But it was established by Russian
presidential decree and received aid because it was run by the
Chubais transactors, who also played key roles in the Russian
government. In practice, the center played the role of government
agency. It negotiated with and received loans from international
financial institutions--which typically lend to governments, not
private entities--and did so on behalf of the Russian state.
According to documents from Russia's Chamber of Accounts, the center
wielded more control over certain privatization documents and
directives than did the Russian government agency formally
responsible for privatization. Two center officials, its ceo from the
Chubais Clan and Harvard's Moscow representative, Hay, were in fact
authorized to sign privatization decisions on Russia's behalf. Thus
did a Russian and an American, both of them affiliated with a private
entity, end up acting as representatives of the Russian Federation.
* "Transidentity"
It was not only organizations that could change guises. The flex
organization had its individual equivalent in the phenomenon of
"transidentity", which refers to the ability of a transactor to
change his identity at will, regardless of which side originally
designated him as its representative. Key Harvard-Chubais transactors
were quintessential chameleons. To suit the transactors' purposes,
the same individual could represent the United States in one meeting
and Russia in the next--and perhaps himself at a third--regardless of
national origin.
Jonathan Hay, who alternatively acted as an American and a Russian,
provides a telling example of this phenomenon. In addition to being
Harvard's chief representative in Russia, with formal management
authority over many other U.S. contractors, Hay was appointed by
members of the Chubais Clan to be a Russian. As such, he was
empowered to approve or veto high-level privatization decisions of
the Russian government. According to a U.S. official investigating
Harvard's activities, Hay "played more Russian than American." The
financial arena yields many such examples of transidentity, in which
Chubais transactors appointed Americans to act as Russians.
It was (and is) difficult to glean exactly who prominent consultants
on the international circuit represented, for whom they actually
worked, who paid them, and where their loyalties and ambitions lay at
any given time. Harvard economist Jeffrey Sachs, who served as
director of the Harvard Institute from 1995 to 1999, provides a case
in point. According to journalist John Helmer, Sachs and his
associates (including David Lipton, vice president of Sachs'
consulting firm who later went to Treasury to work for Summers)
played both the Russian and the IMF sides of the street. During
negotiations in 1992 between the IMF and the Russian government, for
example, Sachs and his associates appeared as advisers to the Russian
side. But they were at the same time "writing secret memoranda
advising the IMF negotiators as well."
Compounding this ambiguity is the question of whether Sachs was an
official adviser to the Russian government. Although he maintains
that he was, key Russian economists as well as international
officials cast doubts on his claim. Jean Foglizzio, the IMF's first
Moscow resident representative, was also taken aback by Sachs'
practice of introducing himself as an adviser to the Russian
government. As Foglizzio put it, "[When] the prime minister [Viktor
Chernomyrdin], who is the head of government, says 'I never requested
Mr. Sachs to advise me'--it triggers an unpleasant feeling, meaning,
who is he?"
Sachs also offered his services as an intermediary. According to
Andrei Vernikov, a Russian representative to the IMF, and other
sources, Sachs presented himself to leading Russians as a powerbroker
who could deliver Western aid. In 1992, when Yegor Gaidar (with whom
Sachs had been working) was under attack and his future looked
precarious, Sachs offered his services to Gaidar's parliamentary
opposition. In November 1992 Sachs wrote a memorandum to the chairman
of the Supreme Soviet, Ruslan Khasbulatov (whose reputation in the
West was that of a retrograde communist), offering advice, Western
aid and contacts with the U.S. Congress. Khasbulatov declined Sachs'
help after circulating the memo. Sachs also proved adept at lobbying
American policymakers.
The most effective and influential transactors are extremely adept at
working their multiple roles and identities. One such ubiquitous
transactor was Anders Åslund, a former Swedish envoy to Russia who
worked with Sachs and Gaidar. Åslund seemed at once to represent and
speak on behalf of American, Russian and Swedish governments and
authorities. Accordingly, he was understood by some Russian officials
in Washington to be Chubais' personal envoy. Though a "private"
citizen of Sweden who played a leading role in Swedish policy and aid
toward Russia, he nonetheless participated in high-level meetings at
the U.S. Treasury and State Departments about U.S. and IMF policies.
Åslund was also involved in business activities in Russia and
Ukraine. According to the Russian Interior Ministry's Department of
Organized Crime, he had "significant" investments in the Russian
Federation. In addition to his work for governments, the
Harvard-Chubais transactors and the private sector, Åslund was
engaged in public relations activities. His assignment in Ukraine,
where he was funded by George Soros, explicitly included public
relations on behalf of that country, according to other Soros-funded
consultants who worked with Ã…slund there. His effectiveness in this
role was no doubt enhanced by his affiliation with Washington think
tanks, his frequent contributions to publications such as the
Washington Post and the London Financial Times, and the fact that he
always presented himself on these occasions as an objective analyst,
despite his many promotional roles.
* Interchangeability
The maneuverability for individuals afforded by transidentity was
also present at the group level. The Harvard Institute group, though
formally representing the United States, also represented the Chubais
group. Thus, some U.S. officials and investigators requesting
meetings with Russians were instead directed to Americans. In
lobbying for aid contracts, the Harvard Institute group continually
cited its access to Russian "reformers" as its primary advantage;
this was in fact a key component of its public relations effort. In
turn, Harvard acted as the Chubais Clan's entrée to the eyes and ears
of U.S. policymakers and to American funds. In the United States, the
Harvard transactors touted Chubais as the voice of Russia, and he
became the quintessential enlightened Russian in the eyes of many
U.S. officials and commentators.
Not surprisingly, then, in times of crisis for the Harvard-Chubais
nexus--such as the ruble crisis of August 1998 and the Bank of New
York money laundering scandals--the transactors and their associates
have sought to bolster their colleagues' continued clout and standing
in both Russia and the United States. Thus, Summers has frequently
rushed to the defense of Chubais and other key transactors. In
testimony before the U.S. House of Representatives' Committee on
International Relations, for example, Summers stoutly defended
Chubais and asked that Chubais' prepared statement ("I Didn't Lie")
be placed in the congressional record. Similarly, Åslund serves as a
staunch defender of and advocate for Chubais. Of late, he also has
been arguing Vladimir Putin's cause.
* Unaccountability and Self-perpetuation
Transactors are largely above formal accountability. The group places
its members in various positions to serve its agendas, which may or
may not conflict with those of the government or public interest they
supposedly serve. The result is a game of musical chairs. For
example, a key agency in Russian "reform", the State Property
Committee, was headed by a succession of Chubais transactors, among
them Chubais himself, Maxim Boycko and Alfred Kokh. Kokh was named
chairman of the Committee after Boycko was fired by Yeltsin for
accepting a thinly veiled $90,000 bribe from a company that had
received preferential treatment in the privatization process. Kokh
himself was later removed for accepting a $100,000 payment from the
same company. Chubais, Boycko and Kokh also held a variety of key
positions in the Harvard-Chubais transactor-run, aid-funded Russian
Privatization Center.
The Chubais transactors are unlikely to disappear in Vladimir Putin's
Russia. In fact, Putin has long been intertwined with them. An
operative in the KGB and briefly head of its successor agency, Putin,
like most members of the Chubais Clan, hails from St. Petersburg and
was intimately involved in the "reforms" there. After moving to
Moscow to work with Chubais, Putin helped to suppress criminal
investigations that implicated Yeltsin and members of his family--as
well as Chubais himself. Chubais, in addition to running the
country's electricity conglomerate, is helping to run Putin's
presidential campaign.
Consequences of Transactorship
What, it might be asked, is wrong with the transactorship mode of
organizing relations between the United States and Russia in such
circumstances? Many U.S. officials have argued that it is the most
effective method by which to implement market reform--through a
committed group with intimate access to both sides (and to many
activities in both countries). In fact, there are several things that
are seriously wrong with this argument.
Transactorship has served to undermine democratic processes and the
development of transparent, accountable institutions.
Operating by decree is clearly anti-democratic and contrary to the
aid community's stated goal of building democracy in Russia. It has
weakened the message to the Russians that the United States stands
for democracy. Further, the aid-created flex organizations have
supplanted the state and often carried out functions that ought to
have been the province of governmental bureaucracies.
As well, the flex organizations have likely facilitated the
development of what I have called elsewhere the "clan-state", a state
captured by unauthorized groups and characterized by pervasive
corruption. In such a state, individual clans, each of which controls
property and resources, are so closely identified with particular
ministries or institutional segments of government that the
respective agendas of the state and the clan become
indistinguishable. Thus, while the Chubais transactors were closely
identified with segments of government concerned with privatization
and the economy, competing clans had equivalent ties with other
government organizations, such as the ministries of defense and
internal affairs and the security services. Generally, where judicial
processes are politically motivated, a clan's influence can be
checked or constrained only by a rival clan. By systematically
bypassing the democratically elected parliament, U.S. aid flouted a
crucial feature of democratic governance: namely, parliamentarianism.
Transactorship has frustrated true market reform.
Without public support or understanding, decrees constitute a weak
foundation on which to build a market economy. Some reforms, such as
lifting price controls, may be achieved by decree. But many others
depend on changes in law, public administration or mindsets, and
require cooperation among a full spectrum of legislative and market
participants, not just a clan.
A case in point was USAID's efforts to reform Russia's tax system,
and to establish clearing and settlement organizations (CSOs)--an
essential ingredient in a sophisticated financial system. The efforts
failed largely because they were placed solely in the hands of one
group, which then declined to work with other market participants. In
Moscow, for example, despite millions of USAID dollars, many Russian
brokers were excluded from the process and consequently declined to
use the CSO. Since 1994, when consultants working under USAID
contracts totaling $13.9 million set out to design and implement CSOs
in five Russian cities, very little evidence of progress has emerged.
After an investigation into the Harvard Institute's activities in
Russia, the U.S. General Accounting Office issued a report calling
the CSO effort "disappointing." Yet, absent support from parties to
the reform process, reforms were almost certain to be ignored or even
subverted during implementation.
To repeat, transactors, although they may share the overall goals of
the sides they represent, may advertently or inadvertently subvert
those goals in pursuit of their own private agendas. The
Chubais-Harvard transactors were known to block reform efforts on
occasion. In particular, they were inclined to obstruct reform
initiatives when they originated outside their own group or were
perceived to conflict with their own agendas. When a USAID-funded
organization run by the Chubais-Harvard transactors failed to receive
the additional USAID funds it had expected, its leaders promptly
obstructed legal reform activities in the areas of title registration
and mortgages--programs that were launched by agencies of the Russian
government. In such instances, the transactors' interference put them
at cross purposes with their own purported aim of fostering markets.
Lack of transparency, too, became apparent in the manner in which the
transactors implemented economic reforms. Secrecy shrouded the
privatization process, with numerous, unfortunate consequences for
the Russian people. Privatization, which was largely shaped by the
Harvard-Chubais transactors and significant parts of which were
funded by USAID, was intended to spread the fruits of the free
market. Instead, it helped to create a system of "tycoon capitalism"
acting in the service of a half dozen corrupt oligarchs. The
"reforms" were more about wealth confiscation than wealth creation;
and the incentive system encouraged looting, asset stripping and
capital flight.
Transactorship has encouraged the maximization of opportunities for
personal gain.
The prestige and access of the Harvard-Chubais transactors
facilitated their involvement in other areas, including allegedly the
Russian securities market, both in Russia and internationally, and
may have helped them enrich themselves. In such ways, the private
agendas of the Harvard-Chubais transactors helped to subvert the
goals of the sides they were supposed to be serving.
Providing a small group of powerbrokers with a blank check inevitably
encouraged corruption, precisely at a time when the international
community should have been demanding safeguards in Russia such as the
development of a legal and regulatory framework, property rights and
the sanctity of contracts. Over the years many substantiated reports
of the Chubais transactors using public monies for personal
enrichment have been published. Today these same persons are among
those under investigation for alleged involvement in laundering
billions of dollars through the Bank of New York and other banks.
The Harvard Institute has also had its difficulties. In 1996 the GAO
found that USAID's management over Harvard was "lax." In 1997 the
government cancelled most of the last $14 million earmarked for the
Institute, citing evidence that the project's two managers--Hay and
Shleifer--had used their positions and inside knowledge to profit
from investments in the Russian securities markets and other private
enterprises. The two remain under criminal and/or civil investigation
by the U.S. Department of Justice. In January 2000 a Harvard task
force issued a report alluding to that financial scandal. It
recommended that the Harvard Institute for International Development
be closed and that selected programs be integrated into other
university programs. The Institute was closed shortly thereafter. An
inspired Harvard University spokesperson, Joe Wrinn, spun the story
thus: "It's a vote of confidence for the study of international
development and its permanent integration into Harvard University."
Because the transactors' success is grounded in mutual loyalty and
trust, and because of their shared record of activities, some of
which have left them vulnerable to allegations of corruption, the
transactors have ample incentive to stick together. Any desertions
must be well considered, as they could have serious consequences for
all involved.
Transactorship has encouraged not only corruption but also the
ability to deny it.
Transactorship affords maximum flexibility and influence to the
transactors, and minimal accountability to the sides the transactors
presumably represent. If the Harvard Institute's manager in Russia
were asked by U.S. authorities to account for privatization decisions
and monies, he could respond by claiming that he made those decisions
as a Russian, not as an American. If USAID came under fire for
funding the Russian state, it could claim that it was funding private
organizations.
Now that the issue of "Russian" corruption has captured headlines, Treasury Secretary Summers has lately been insisting that the Russian government make amends. "This has been a U.S. demand for years", he claims, as if he had not himself addressed letters to "Dear Anatoly" and met with Chubais as recently as the summer of 1999. This only months after Chubais admitted that he had "conned" from the IMF a $4.8 billion installment in July 1998, the details of that deal having been worked out in Summers' home over brunch--at a meeting that the New York Times deemed crucial to obtaining release of the funds.
Transactorship has proved particularly harmful in a setting in which communism until recently prevailed.
The transactorship mode of organizing relations is reminiscent of precisely those features of communism that the international community should be concerned not to reinforce. The informal, but influential, parallel executive established by the Harvard-Chubais transactors recalls the powerful patronage networks that virtually ran the Soviet Union. Political aid disguised as economic aid is only too familiar to Russians raised under a system of political control over economic decisions. As Shleifer acknowledged in a 1995 book funded by Harvard, "Aid helps reform not because it directly helps the economy--it is simply too small for that--but because it helps the reformers in their political battles."
And yet U.S. officials have defended this approach. In a 1997 interview, Ambassador Richard L. Morningstar, U.S. aid coordinator to the former Soviet Union, said, "When you're talking about a few hundred million dollars, you're not going to change the country, but you can provide targeted assistance to help Chubais" -- an admission of direct interference in Russia's political life. U.S. assistance to Chubais continued even after he was dismissed by Yeltsin as first deputy prime minister in January 1996: he was placed on the Harvard payroll, a demonstration of solidarity for which senior U.S. officials openly declared their support.
THE U.S.-RUSSIAN experience of transactorship is interesting and disturbing not only in its own right, but because this mode of operating may well become more frequent as a way of conducting transnational affairs in the twenty-first century. With the ongoing process of globalization, the nationality of actors is becoming increasingly irrelevant. Already global elites, with ever closer connections to one another and fewer to the nation-state, see themselves not so much as American, Brazilian or Italian, but as members of an exclusive and highly mobile multinational club, whose rules and regulations have yet to be written. In many respects, members of what Peter Berger has identified as the overlapping "Davos" and "Faculty Club" cultures have much more in common in terms of lifestyle and taste with each other than they have with their fellow nationals. And as Berger observes, "it may be that commonalties in taste make it easier to find common ground politically"--and, of course, economically.
While all this is true, global elites will continue to operate in a world organized into nation-states. In such a world, assumptions about representation, grounded in national and international law, are based on the idea that an individual can formally represent either one state or another, but not both. The transactor mode of behavior may seem to offer a means of having it both ways, of squaring the circle. But it also raises crucial public policy questions. What are the implications of a state of affairs in which the "choice" of who represents one side is shaped to a significant degree by self-selected representatives of the other? What are the consequences when the same player represents multiple sides? Wherein lies the accountability to electorates and parliaments in a world of growing coziness and joint decision-making among governing elites? Where, if at all, do representation and democracy enter the picture? The U.S.-Russian case in the last decade provides a cautionary lesson in all these respects. But it has been a very expensive lesson.
Janine R. Wedel, an anthropologist, is author of Collision and Collusion: The Strange Case of Western Aid to Eastern Europe 1989-1998 (St. Martin's Press, 1998). She is associate professor at the Graduate School of Public and International Affairs at the University of Pittsburgh, and director of its research development at the Ridgway Center.
Essay Types: Essay